Method and apparatus for executing cryptographically-enabled letters of credit

ABSTRACT

A method and apparatus for executing electronic transactions using cryptographically-enabled accounts stores cryptographically-enabled account information and instructions, receives a cryptographically-encoded permission certificate, and processes the received permission certificate to execute the transactions.

The present Application is a Continuation Application of co-pending U.S.patent application Ser. No. 08/832,832 entitled “METHOD AND APPARATUSFOR EXECUTING CRYPTOGRAPHICALLY-ENABLED LETTERS OF CREDIT”, filed Apr.3, 1997 now U.S. Pat. No. 6,477,513 in the name of Walker et al; whichissued as U.S. Pat. No. 6,477,513 B1 on Nov. 5, 2002. The entirety ofthe above-referenced Application is incorporated by reference herein forall purposes.

BACKGROUND OF THE INVENTION

The present invention relates to information systems and methods, andmore particularly to information systems facilitating financialtransactions involving escrow accounts.

Financial transactions involving escrow accounts, such as letters ofcredit (“LC”), are well known commercial transactions that provide avaluable service for domestic and international trade. An LC is acommercial contract between two parties (a buyer and a seller) in whichone or more banks serve as trusted agents to secure and facilitate thetransaction.

Tracing the steps in a typical LC illustrates how financial transactionsusing similarly structured escrow accounts are conducted. A typical LCinvolves a U.S. company (the buyer) that wants to purchase 100,000widgets for $1 million from a supplier in Germany (the seller) on net90-day delivery terms. Both the buyer and the seller use local U.S. andGerman banks. In order to fulfill the order, the seller needs to financethe raw materials and labor to produce the widgets. The seller presentsa signed purchase order from the U.S. company to their local German bankto borrow $750,000. The terms of the sale provide, for example, net 90day payment after delivery.

The German bank wants to lend the $750,000 to the German supplier, butis not confident of the creditworthiness of the U.S. company and worriesthat the U.S. company might change its mind and reduce the order sizebefore delivery is made. The German bank is, however, confident that theGerman company can deliver the widgets. The bank informs the Germansupplier that unless the American company either pays 50% in advance orprovides an absolutely reliable guarantee of payment andnon-cancellability (either from the U.S. company or some trusted thirdparty), the German bank cannot lend the German company the $750,000 itneeds. The German company notifies the American company of the problem.

The American company in turn communicates its predicament to their localbank in the U.S. They explain that they do not want to pay the Germansupplier 50% in advance because they are uncertain as to the financialstrength of this new supplier and have some concerns as to whether thesupplier will be able to deliver on the widget contract as set forth inthe purchase order. The American company then asks whether the bankmight be willing to serve as a trusted intermediary to facilitate thetransaction.

The American bank creates a special form of a contract called anirrevocable LC, which acts as an irrevocable promise by one bank toremit money to another party (e.g. a bank in a foreign country) undercertain terms and conditions. In this example, the American bank agreesto pay the German bank $1 million 90 days after 100,000 widgets arereceived at a specified warehouse in New York, so long as the widgetshave been inspected and approved by an independent inspector as adheringto the quality standards set forth in the purchase order.

To secure the LC, the American bank requires the American company toplace $1 million in an interest-bearing escrow account at the Americanbank. The American company cannot withdraw this money except undercertain pre-agreed circumstances, such as a release of the LC by theGerman bank. The American bank charges the buyer a fee for setting upthe LC, typically 1% of its value. There may also be other associatedcharges. With an LC from a recognized and trusted American bank, theGerman bank is confident that so long as the widgets are delivered aspromised, they are sure to get paid per the agreed-upon terms i.e. 90days from delivery. They are also sure that should a dispute arise, atrusted, independent third party (the American bank) will seek toresolve the problem and that the money will remain in escrow until suchresolution is completed. On this basis, the German bank lends $750,000to the German supplier and commerce between two wary parties in twodifferent countries takes place smoothly.

In some cases, the money in the escrow account which secured the LC isnot paid to the seller's bank. Instead, it acts as a security bond (aform of insurance) such that if the American company does not pay theGerman company on time, the German bank may seek to enforce the LC andclaim all or part of the money in the escrow account.

An LC often involves large multinational intermediary banks or tradingcompanies since most smaller banks do not have direct or ongoingrelationships with foreign banks. These intermediary institutionsregularly sell LC services to other banks and are referred to ascorresponding or agent banks.

A typical LC has the following components:

-   1. The terms of the sale (usually a written contract)-   2. A buyer-   3. The buyer's trusted financial agent (usually a bank)-   4. The buyer's escrow account (or an insurance bond)-   5. A seller-   6. The seller's trusted financial agent (usually a bank)-   7. An independent arbiter of contract fulfillment-   8. Trusted banking/legal authorities for assured performance and    dispute resolution    1. The Terms of Sale

This is the contract that governs the transaction. It is typically fixedin advance though the price can be left open based on an agreed formulasuch as the prevailing price on a specified exchange at the time ofdelivery. Contracts set forth all of the relevant terms and conditions.They typically cannot be canceled or repudiated except under veryspecific conditions.

2. A Buyer

A buyer is usually the recipient of specific goods. Though LC's almostalways have a specified buyer and seller, it is possible that the buyeris also a seller, for example, in a transaction where the buyer alsoagrees to sell something to the seller. Also, commodity barter dealsblur the distinction between buyer and seller (e.g., 10,000 tons of coalare bartered for 1 million gallons of oil).

3. A Buyer's Trusted Financial Agent

This trusted agent is typically a bank, but any third party with theability to issue a promise acceptable to the seller (or the seller'sfinancial agent) can serve this role. For example, Japanese tradingcompanies often issue LC's.

4. The Buyer's Escrow Account

To prevent a buyer from reneging, the buyer's financial agent usuallyrequires that the buyer place the total face value of the LC in aninaccessible escrow account. This form of security deposit does not haveto be liquid. It could be government bonds, marketable securities or anyother form of value which is acceptable to the issuing bank, including aportion of the company's active credit line that is segregated andpledged as security for the LC.

5. Seller

A seller is the other major party to the transaction.

In some cases the seller is the direct beneficiary of the LC. In othercases it is the seller's financing agent.

6. A Seller's Trusted Financial Agent

This trusted agent is typically a bank, but it can be any party. Usuallyit is the party or parties that are financing the seller's ability tocomplete or deliver the contract.

7. An Independent Arbiter of Contract Fulfillment

This is the party empowered to declare that the delivery terms of thecontract have been fulfilled. This party is almost always independent ofall of the other parties and is trusted by all parties. There may alsobe more than one of these parties in any given transaction. For example,for imported meat, the product must clear customs and be approved by theU.S.D.A. as meeting its standards of quality. In some cases, where thereis no significant quality component to the contract fulfillment, such asthe purchase of 1,000 tons of gravel, a simple bill of lading to aseller's ship can suffice as proof of delivery.

8. Trusted Banking and Legal Authorities for Assured Performance andDispute Resolution

The entire LC system would not function if not for the parties' mutualconfidence in the reliability of the legal and banking regulatorysuperstructure found in industrialized countries. This superstructureassures each party to an LC that the banks or financial institutionsinvolved will behave predictably, responsibly and expeditiously. Allparties are aware that banks will follow established regulations andlaws for which there are both substantial and probable penalties forwillful violation. And all parties understand that there is clear legalrecourse should any party act in bad faith or in a fraudulent manner.

Methods and systems currently used for these transactions are complex,expensive, and often time-consuming to set up and administer. As such,they are currently used only by companies engaged in substantialinternational trade. A need exists to simplify the process, reduce theassociated costs, and allow individuals and small companies simple andpractical access to the benefits of these transactions in bothinternational and domestic transactions.

A buyer's flexibility in LC transactions is limited because the buyermust have a pre-established banking relationship. Thus, it is difficultto shop around or create ad hoc LC's. The buyer's bank must be willingand able to set them up, and many banks are not capable of doing so.Others will only issue certain types of LC's. Also many current systemsrequire that the buyer, seller, and bank know the identity of the sellerin order to create an LC. Moreover, the cost and fees associated withLC's are often very high, especially relative to smaller valuetransactions. To provide a buyer with greater flexibility in LCtransactions, the buyer would prefer that banks issue LC's through anylarge or trusted company, such as a Fortune 500 supplier, insurancecompany, or investor.

Other examples of transactions involving escrow accounts include realestate escrow accounts administered by attorneys serving as trustedthird parties. A seller who enters into a contract to sell real estateto a buyer will often require that the buyer demonstrate that it iscapable of financing the transaction and that certain penalties or othermonies (such as tax payments due) are set aside in escrow should thetransaction call for the payment of such monies. Because attorneys haveongoing reputations that survive the transaction, and because attorneysare well aware of the legal ramifications of violating escrowagreements, two law firms who are unfamiliar with each other will oftentrust one another even if the parties they are representing do not.

Using available methods and systems for escrow transactions, it isdifficult for a foreign seller to help a foreign buyer set up localbanking relationships capable of supporting these transactions. Theseller and the seller's bank may not have experience with thesetransactions and thus, even if the buyer can support its end of thetransaction, the seller may not have systems compatible with the buyer'ssystems. Furthermore, in the current environment, banks that would liketo accommodate buyers and sellers by offering these transactions may beprecluded because of the need for specialized expertise or internationalaffiliate networks.

Other examples of these accounts include numbered and anonymous,“Swiss-style” bank accounts. These accounts are not identified by name,but by number. This allows anonymity of the account's owner, althoughthe bank typically knows the owner's identity. Numbered accounts aredesigned to allow access to anyone with the number, so the number servesas an unrestricted key to any holder.

SUMMARY OF THE INVENTION

The present invention is directed to a method and apparatus forexecuting electronic transactions using cryptographically-enabledaccounts. An apparatus consistent with the present invention includesstructure for storing cryptographically-enabled account information;structure for storing cryptographically-enabled instructions; andstructure for receiving a cryptographically-encoded permissioncertificate. The apparatus also includes structure, connected to bothstoring structures, for processing the permission certificate andinstructions.

A method for automatically executing electronic transactions using acryptographically-enabled account includes the steps of establishing anacceptable electronic representation of a contract, creating thecryptographically-enabled account according to terms in the contract,distributing cryptographically-encoded electronic permissioncertificates allowing account access according to terms in the contract,receiving a cryptographically-encoded electronic permission certificateverifying fulfillment of contract terms, and permitting account accessresponsive to an account access cryptographically-encoded electronicpermission certificate.

Both the foregoing general description and the following detaileddescription are exemplary and explanatory and are intended to providefurther explanation of the invention as claimed.

DESCRIPTION OF THE FIGURES

The accompanying drawings provide a further understanding of theinvention. They illustrate embodiments of the invention and, togetherwith the description, explain the principles of the invention.

FIG. 1 is a document flow diagram illustrating one possible environmentfor a method and apparatus consistent with the present invention;

FIG. 2 is a document flow diagram illustrating permission certificatedistribution in a financial transaction involving escrow accountsconsistent with the present invention;

FIG. 3 is a document flow diagram illustrating steps taken when a sellerwithdraws funds from an escrow account consistent with the presentinvention;

FIG. 4 is a block diagram of a terminal and controller consistent withthe present invention;

FIG. 5 is a block diagram of a trusted agent controller databaseconsistent with the present invention;

FIG. 6 is an example of records stored in a contract terms databaseconsistent with the present invention;

FIG. 7 is an example of records stored in a permission certificatedatabase consistent with the present invention;

FIG. 8 is a block diagram of a bank controller database consistent withthe present invention;

FIG. 9 is an illustration of records in an account database consistentwith the present invention;

FIG. 10 is a block diagram of a buyer and seller database consistentwith the present invention;

FIG. 11 is a block diagram of a terminal and controller for averification authority consistent with the present invention;

FIG. 12 is a flow diagram of a method for contract signing consistentwith the present invention;

FIG. 13 is a flow diagram of a method for accepting a contractconsistent with the present invention;

FIG. 14 is a flow diagram of additional steps of a method for acceptinga contract consistent with the present invention;

FIG. 15 is a flow diagram of one method for establishing an accountconsistent with the present invention;

FIG. 16 is a flow diagram of one method for distributing permissioncertificates consistent with the present invention;

FIG. 17 is a flow diagram of one method for verifying permissioncertificates consistent with the present invention; and

FIG. 18 is a flow diagram of one method for account access consistentwith the present invention.

DETAILED DESCRIPTION OF THE INVENTION

Reference will now be made in detail to the preferred embodiments ofthis invention, examples of which are illustrated in the accompanyingdrawings.

To illustrate the environment of this invention, FIG. 1 is a documentflow diagram illustrating one possible scenario using a method andapparatus consistent with the present invention. The figure depicts atypical transaction in which buyer 102 and seller 104 negotiate and signa contract. While negotiating terms of the contract, buyer 102 andseller 104 exchange unsigned contracts 108 and 110. Once the buyer andseller agree on the contract terms, buyer 102 digitally signs andtransmits contract 114 to trusted agent 118 who forwards thebuyer-signed contract to seller 104. Seller 104 accepts and digitallysigns the contract, creating buyer and seller-signed contract 106. Theseller returns buyer and seller-signed contract 106 to buyer 102 throughan agreed upon trusted agent 118, thus closing the agreement. It will beunderstood that the establishment of the contract as described need notnecessarily be electronic. A conventionally signed paper document may beused to establish the signed contract. Further, buyer 102 and seller 104may negotiate the contract directly, providing only the final signedcopy to trusted agent.

It will be noted that subscripts within the drawing indicate the signingor receiving party of the various documents. For example, “CONTRACT_(B)”indicates a contract signed by the buyer, while “CERTIFICATE_(VAB)”indicates a certificate distributed to verification authority B. It willfurther be understood at while subsequent Figures use differentreference numbers to describe the various parties, where a unitarytransaction occurs, the various parties are the same throughout thedifferent phases of the transaction.

FIG. 2 is a document flow diagram illustrating permission certificatedistribution in a financial transaction involving escrow accounts.

As used herein, term “escrow account” defines the establishment of avalue which can not be released except upon the occurrence of thepre-determined contract conditions. The escrow account may be an actualstand-alone account or, as described above, the locking of a portion ofa larger account, a line of credit, a bond or other financial document,or the like. Once buyer and seller have executed a contract, buyer 202sends buyer and seller-signed contract 220 along with any deposit money228 to bank 226. Bank 226 distributes permission certificates, thatverify that there is a valid agreement between the parties and thatfunds have been allocated in an escrow account for the transaction. Asdescribed in detail below, “permission certificate” herein comprises adigital code. The permission certificates go to the parties involved inthe transaction, buyer 202, seller 204, verification authorities Athrough C 206, 208, and 210, respectively, and trusted agent 218. Thebank distributes Seller and Buyer permission certificates 222, 224,while trusted agent 218 distributes verification authority permissioncertificates 212, 214, 216. Verification authorities 206, 208, 210 areresponsible for certifying that both buyer and seller adhere to theterms of the contract, for example, by certifying that the goodsdelivered by seller 204 meet government regulations.

After performing the terms of the contract, the seller withdraws fundsfrom the escrow account according to a process illustrated in FIG. 3.After verifying that the seller's performance meets the terms of thecontract, each verifying authority A, B, and C returns its permissioncertificate to trusted agent 318. When the verifying authorities returnpermission certificate 312, permission certificate 314, and permissioncertificate 316, trusted agent 318 issues withdrawal permissioncertificate 320 to seller 304. Seller 304 presents this withdrawalpermission certificate 320 to bank 326 to receive payment 322 from thebank's escrow account established for this transaction. Bank 326 thensends withdrawal confirmation 324 to buyer 302 completing thetransaction.

Practicing principles consistent with the invention, financialinstitutions can establish standard form cryptographically-enabledaccounts (CEA) and software protocols governing such accounts enablingautomated negotiations and Processing of financial transactions. SuchCEA's can be used to facilitate, for example letters of credit, withoutthe traditional complexity and costs of the prior art. Moreover, withthe proper equipment, anyone can log onto a network and set up atransaction using a CEA from their office or home in a matter ofminutes. The transaction is secure because it uses cryptographicpermission certificates that are easy to generate but extremely hard toforge. The transaction also uses electronic digital signatures thatprevent the buyer or seller from altering or repudiating the contract.

Also in these automated transactions, companies can be formed to serveas trusted agents or can add trusted agent services to those theyalready provide. In all industries where agents facilitate commerce,there is a thriving and competitive marketplace of agents, especiallysmall agents. In addition, insurance companies, brokerage houses andother companies that maintain financial accounts can offer trusted agentservices in competition with independent agents and banks.Cryptographically-enabled controllers and methods consistent with thepresent invention can spur a thriving market of trusted agents thatservice many cryptographically-enabled domestic and internationalfinancial transactions. Where appropriate, banks themselves may alsoconstitute the trusted agents.

A benefit of these cryptographically-enabled accounts is that they canbe self-enforcing. If, for example, the seller does not deliver on thedeadline established by the contract, the buyer can easily reclaim themoney in the account without having to seek a revocation or cancellationof the contract.

A further benefit of this invention is anonymity of the transactingparties. Anonymity is facilitated in ways not allowed in the prior art.“Blind” CEA's can be set up so that the bank involved has no knowledgeof the buyer and/or the seller in the transaction. Anyone who presentsthe correct permission certificates can operate on the account in amanner consistent with the provisions established for that account.

Methods and apparatus consistent with the present invention are directedto providing an automated cryptographic framework for executing thefinancial transactions described above. To illustrate the principles ofthis invention, FIG. 4 shows terminal 424, modem 416, and controller406. Terminal 424 includes video monitor 402 and input device 404, suchas a keyboard and mouse. Cryptographically-enabled controller 406includes video driver 412, random access memory (“RAM”) 410, read onlymemory (“ROM”) 408, central processing unit (“CPU”) 418, communicationsport 414, cryptographic processor 420, and data storage device 422.Video monitor 402 connects to controller 406 through video driver 412and input device 404 connects to the controller through CPU 418. Modem416 communicates with another terminal and controller apparatus througha network, such as the public switched telephone network, the Internet,a local area network, or a wide area network. In an embodimentconsistent with the present invention, each facility (i.e., buyer,seller, trusted agent, verification authority, and bank) depicted in theflow diagrams of FIGS. 1-3 has access to a terminal and controller pair.

When the terminal and controller pair serves a trusted agent, datastorage device 422 contains trusted agent controller database 502 asillustratively shown in FIG. 5. Trusted agent controller database 502contains contract terms database 504, permission certificate database506, and condition evaluation program 508.

FIG. 6 is an example of a record stored in contract terms database 504.Included in this record are fields for authorization number 602, partyname 604, party address 606, permission certificate type 608, start date610, expiration date 612, conditions 614, status 616, and amount 618.The contents of each field are self-explanatory. Note, however, that thestructure of this table becomes lengthier when the contract terms arecomplex.

FIG. 7 is an example of a record stored in permission certificatedatabase 506. Included in this record are fields for permissioncertificate number 702, permission certificate code 704, permissioncertificate type 706, expiration date 708, and conditions 710. Some orall of the data included in these fields can be stored as encrypteddata.

The present invention contemplates many different types of permissioncertificates, some of which are described in Table 1 below. It will beapparent to those skilled in the art that permission certificate typescan be created to match the terms and conditions of any type ofcontract. The remaining fields are self-explanatory, with their functiondiscussed in further detail below.

TABLE 1 Examples of permission certificates. Certificate Type UserFunction lock/unlock trusted agent lock/unlock an account verificationtrusted agent verify an account existence inquiry/balance buyer orseller determine balance/status withdrawal seller withdraw account fundspartial withdrawal seller withdraw account funds deposit buyer depositaccount funds Partial deposit buyer Deposit account funds Expire buyerclose account

When the terminal and controller pair serves a bank, data storage device422 contains bank controller database 802 as illustratively shown inFIG. 8. Bank controller database 802 contains contract terms database804, account database 806, permission certificate calculation program808, and permission certificate decryption program 810. Contract termsdatabase 804 preferably has the same structure as the contract termsdatabase structure illustrated in FIG. 6.

FIG. 9 is an illustration of the records in account database 806.Account database records include, for example, fields for an accountnumber 902, holder name 904, holder address 906, balance 908, status910, “last changed by” public key number 912, and date of last change914. The key corresponding to the “last changed by” public key numberfield 912 is preferably stored as a file containing 512-bit or largernumbers. The contents of these fields are self-explanatory. Thefunctions of all of the referenced programs are described herein below.

When configured for a buyer or seller, terminal and controller pair datastorage device 422 contains buyer/seller database 1002 (FIG. 10)including contract terms database 1004 and permission certificatedatabase 1006, each containing records whose structure follows therecord structure illustratively shown in FIGS. 6 and 7, respectively.

FIG. 11 shows terminal 1124, modem 1116, and controller 1106 for averification authority. Terminal 1124 includes video monitor 1102 andinput device 1104, such as a keyboard and mouse. Controller 1106includes video driver 1112, RAM 1110, ROM 1108, central processing unitCPU 1118, communications port 1114, and data storage device 1122. Videomonitor 1102 connects to controller 1106 through video driver 1112 andinput device 1104 connects to the controller through CPU 1118. Tosimplify the architecture and to reduce the cost of a controller whenconfigured as a verification authority controller, it need not include acryptographic processor. Modem 1116 communicates with another terminaland controller apparatus through a network, such as the public switchedtelephone network. Data storage device 1122 contains contract termsdatabase 1128 and permission certificate database 1130, each containingrecords whose structure follows the records illustratively shown inFIGS. 6 and 7, respectively.

FIGS. 12 through 14 are flow diagrams for a method and program forexecuting electronic transactions using cryptographically-enabledaccounts consistent with the invention. FIG. 12 is a flow diagramshowing steps relating to contract signing. A buyer, using a buyerterminal and controller as described in detail above, initiates atransaction by transmitting a proposed contract in electronic form tothe seller's controller (step 1202). If the seller chooses not to acceptthe terms of the proposed contract (step 1204), the seller modifies thecontract terms (step 1206) and returns the contract to the buyer'scontroller (step 1208). If the buyer accepts the contract (step 1210),he digitally signs the contract (step 1214). Otherwise, if the buyerchanges the contract (step 1212), the process returns to step 1202.

A buyer generates a digital signature using, for example, cryptographicprocessor 420 in the buyer's controller. Cryptographic processor 420executes cryptographic algorithms such as the algorithms specified inRSA Data Security, Inc.'s Public Key Cryptography standards oralgorithms specified by ANSI X.509. Such algorithms can also include,for example, symmetric encryption function, public key encryptionfunction, hash functions, and others known to those skilled in the art.The digital signature verifies that the buyer accepted the contract. Ofcourse, if the seller initiates the transaction, the roles of the sellerand buyer are reversed in the foregoing steps, with contract negotiationending when the seller digitally signs the contract. The practice ofusing cryptographic protocols to ensure the authenticity of senders aswell as the integrity of communications is well known in the art andneed not be described here in detail. Any conventional cryptographicprotocols such as those described in Bruce Schneier, AppliedCryptography, Protocols, Algorithms, and Source Code In C (2d ed. 1996),could be used in accordance with the present invention.

FIGS. 13 and 14 are flow diagrams showing steps of a method relating tothe seller's acceptance and signing of the contract. Using itscontroller, the buyer transmits the digitally signed contract to thecontroller of a trusted agent (step 1302). Using cryptographic processor420 in the trusted agent controller, the trusted agent digitally signsthe contract (step 1304) and electronically transmits the contract tothe seller's controller (step 1306). If the seller verifies that theterms of the contract are still valid (step 1308), the seller digitallysigns the contract (step 1312); otherwise, buyer and seller return tocontract negotiations (step 1310). The seller then stores the signedcontract in the seller's controller contract terms database 1004 (step1402) and transmits an electronic copy to the trusted agent's controller(step 1404). If the trusted agent's copy of the contract matches thecontract received from the buyer (step 1406), the trusted agent storesthe contract in contract terms database 504 (step 1410) and transmitsthe contract to the buyer's controller (step 1412). The buyersubsequently stores the contract in its controller's contract termsdatabase 1004 (step 1414). If the trusted agent determines that thebuyer and seller versions of the contract do not match, contractnegotiations begin again (step 1408). As described above, the method ofexecuting the contract may also be conventional paper documents.

Once both the buyer and seller have an electronic copy of a trustedagent-verified, executed contract, the parties to the transactionestablish a CEA at a bank. A CEA is an account established at anyfinancial institution where both access to and control over the funds inthe account are governed by encrypted control permission certificates.FIG. 15 is a flow diagram showing one method of establishing such anaccount consistent with the present invention. The buyer transmits thesigned contract to the bank, along with an amount of money specified bythe contract, serving as a bond (step 1502). The bank stores thecontract in its controller's contract terms database 804 (step 1504) andestablishes a unique account number for a new CEA (step 1506). Fundsdeposited in a CEA (step 1508) are governed both by a formal agreementamong all of the parties to the transaction called the Account Terms andConditions (“ATAC”), which includes the terms of the contract previouslynegotiated and signed by the buyer and seller, and also by a set ofknown cryptographic protocols. These protocols govern the process bywhich the bank releases funds from the CEA to the seller. Because thetransaction is handled electronically using digital signatures, eitheror both parties can be anonymous to each other and to the bank.

After digitally signing the ATAC, neither party can unilaterally modifyor repudiate it. The bank creates a new record corresponding to the CEAin account database 806 (step 1510), and stores in that recordinformation describing the account, such as balance, buyer name, andaddress (step 1512).

The trusted agent, mutually selected by both buyer and seller,administers the ATAC and distributes permission certificates to the CEAusing its controller. The trusted agent need not have any priorrelationship with the bank, buyer, or seller. Moreover, the bank canserve as the trusted agent and distribute permission certificates asshown in FIG. 16. In the permission certificate distribution example ofFIG. 16, the bank uses permission certificate calculation program 808 toevaluate the elements of the contract (step 1602) and to generate apermission certificate for each permission certificate request in thecontract (step 1604). It will be understood that this function isstraight-forwardly performed by generating a permission certificate foreach condition in the contract. Using its controller, the bank transmitseach permission certificate to the controller for each facilitydesignated in the bank's contract terms database 804. The bank places acryptographic lock on the CEA, giving the bank ultimate control over theaccount. These steps are identical for a trusted agent other than thebank.

A cryptographic lock prohibits access to the CEA and is controlled by alock permission certificate. One embodiment of such a lock permissioncertificate consistent with the present invention is a data file havingthe following format:

1) a string of data identifying the permission certificate as a “lockpermission certificate”;

2) a string of data uniquely identifying the corresponding CEA;

3) the public digital signature key of the person that may use thepermission certificate;

4) the public digital signature key of the controlling trusted agent;

5) the public digital signature key of the trusted agent using this lockpermission certificate;

6) the trusted agent's digital signature on the ATAC; and

7) the trusted agent's digital signature on the combined data of 1-6appended to the combined data of 1-6.

The trusted agent's controller generates a lock permission certificate.Once locked, neither the buyer nor the seller can access money in theCEA until the CEA is unlocked. An unlock permission certificate has adata file format that parallels the lock permission certificate. Eachparty that will withdraw money from the CEA during the transaction willreceive from the bank a withdrawal or partial withdrawal permissioncertificate that includes the public signature key of the partyauthorized to use it and the amount of money that its holder canwithdraw. One embodiment of such a withdrawal or partial withdrawalpermission certificate consistent with the present invention is a datafile having the following format:

1) a string of data identifying the permission certificate as a“withdrawal or partial withdrawal permission certificate;”

2) a string of data uniquely identifying the corresponding CEA;

3) the public digital signature key of the person that can withdrawmoney from the CEA;

4) the public digital signature key of the controlling trusted agent;

5) the public digital signature key of the trusted agent using thiswithdrawal permission certificate;

6) the amount of money that the holder of this withdrawal permissioncertificate can withdraw;

7) the trusted agent's digital signature on the ATAC; and

8) the digital signature of the trusted agent on the combined data ofitems 1-7 appended to the combined data of 1-7.

The buyer, seller, or trusted agent may each have an inquiry permissioncertificate according to terms in the ATAC, permitting the holder toquery the bank to get information on the CEA, such as verifying thetotal amount of funds on deposit or verifying that the amount on depositmeets or exceeds a certain amount. A deposit can be made using a depositpermission certificate that has a data file format that parallels thewithdrawal permission certificate. The inquiry permission certificatealso allows the parties to review the terms and restrictions in anauthenticated version of the ATAC. One embodiment of such an inquirypermission certificate consistent with the present invention is a datafile having the following format:

1) a string of data identifying the permission certificate as an“inquiry permission certificate;”

2) a string of data uniquely identifying the corresponding CEA;

3) the public digital signature key of the person that may use thepermission certificate;

4) the public digital signature key of the controlling trusted agent;

5) the public digital signature key of the trusted agent using thisinquiry permission certificate;

6) the trusted agent's digital signature on the ATAC; and

7) the digital signature of the trusted agent on the combined data ofitems 1-6 appended to the combined data of items 1-6.

A CEA preferably has a finite lifetime dictated by the ATAC. Therefore,if the trusted agent does not transmit to the seller a withdrawalpermission certificate enabling the seller to withdraw the money in theCEA before the expiration date of the account, the buyer may use anexpire key to close the CEA and withdraw the deposited money. Oneembodiment of an expire permission certificate consistent with thepresent invention is a data file having the following format:

1) a string of data identifying the permission certificate as an “expirepermission certificate;”

2) a string of data uniquely identifying the corresponding CEA;

3) the public digital signature key of the person that may use theexpire permission certificate;

4) the public digital signature key of the controlling trusted agent;

5) the public digital signature key of the trusted agent using thisexpire permission certificate;

6) the trusted agent's digital signature on the ATAC;

7) the amount of money that can be withdrawn;

8) a time stamp indicating the earliest date that the money can bewithdrawn; and

9) the trusted agent's digital signature on the combined data of items1-8 appended to the combined data of items 1-8.

FIG. 17 is a flow diagram of a process for verifying performance of thecontract. When appropriate, the parties to the transaction designate averification authority who serves as an independent auditing authorityto assure the trusted agent monitoring the transaction that the partieshave met the conditions of the agreement, for example, the delivery ofgoods to a verification authority (step 1702). The verificationauthority then signs its verification authority permission certificate(step 1703). According to the terms of the ATAC, the trusted agentdistributes verification authority permission certificates to designatedverification authorities who store these permission certificates inpermission certificate database 1130 of verification authoritycontroller 1106. Using, preferably, verification authority controller1106, a verification authority returns the verification authoritypermission certificate after verifying that the seller has performed theconditions of the contract (step 1704). One embodiment of such averification authority permission certificate consistent with thepresent invention is a data file having the following format:

1) a string of data identifying the permission certificate as a“verification authority permission certificate;”

2) a string of data uniquely identifying the corresponding CEA;

3) the public digital signature key of the person that may use thepermission certificate;

4) the public digital signature key of the controlling trusted agent;

5) the public digital signature key of the trusted agent using thisverification authority permission certificate;

6) the trusted agent's digital signature on the ATAC; and

7) the trusted agent's digital signature on the combined data of items1-6 appended to the combined data of items 1-6.

The trusted agent searches trusted agent permission certificate database506 (step 1706), verifies that the permission certificate is valid (step1708), and updates the status for the delivery confirmation permissioncertificate in the-permission certificate database to “received” (step1710). The trusted agent then executes condition evaluation program 508on the received permission certificate (step 1712) to determine if thetrusted authority must now send a withdrawal permission certificate tothe party designated in the ATAC (step 1714). If so, the trusted agentsends the withdrawal permission certificate (step 1718) and updates thestatus for this permission certificate in trusted agent permissioncertificate database 506 to “sent” (step 1720). Otherwise, if thetrusted agent condition evaluation program determines that the trustedagent should not send a withdrawal permission certificate, theverification process ends (step 1716). The withdrawal permissioncertificate is just one example of the types of permission certificatesused in such a transaction. Other transactions may involve, for example,partial withdrawal or verification authority permission certificates.

FIG. 18 is a flow diagram of the steps for accessing the CEA. The bankcontroller receives a permission certificate from one of the parties tothe transaction (step 1802) and decrypts it using permission certificatedecryption program 810 (step 1804). Depending on the permissioncertificate type (step 1806), the bank controller takes certain actions.For example, if the permission certificate is a lock or unlockpermission certificate, the bank either locks or unlocks the CEA (step1812). A withdrawal permission certificate causes the bank to transmitfunds to the party designated in the contract (step 1810). Afterprocessing unlock, lock, and withdrawal permission certificates, thebank transmits notification of the action to the trusted agent. Whenresponding to an inquire permission certificate, the bank transmitsnotification of the CEA balance to the party identified by thepermission certificate (step 1808).

While this description illustrates and describes certain preferredembodiments and methods consistent with the present invention, personsskilled in the art will understand that various changes andmodifications may be made, and equivalents may be substituted withoutdeparting from the scope of the invention. For example, other terminals,databases, and encryption may be used. And, if a facility providesappropriate security measures, the facility can accommodate controllerscapable of serving multiple roles.

In addition, many modifications may be made to adapt a particularelement, technique or implementation to the teachings of the presentinvention without departing from the central scope of the invention.Therefore, this invention is not limited to the particular embodimentsand methods disclosed, but includes all embodiments falling within thescope of the appended claims.

1. A method comprising: transmitting a verification authority permissioncertificate from a trusted agent to a verification authority; signingthe transmitted verification authority permission certificate;transmitting the signed verification authority permission certificatefrom the verification authority to the trusted agent to verify that aseller has performed conditions of a contract; electronicallytransmitting a withdrawal permission certificate from the trusted agentto the seller in response to receipt of the signed verificationauthority permission certificate, thereby permitting the seller towithdraw an amount of funds from a bank; and transmitting the withdrawalpermission certificate from the seller to the bank.
 2. A computerreadable medium storing instructions configured to direct a processor toperform the method of: transmitting a verification authority permissioncertificate from a trusted agent to a verification authority; signingthe transmitted verification authority permission certificate;transmitting the signed verification authority permission certificatefrom the verification authority to the trusted agent to verify that aseller has performed conditions of a contract; transmitting a withdrawalpermission certificate from the trusted agent to the seller in responseto receipt of the signed verification authority permission certificate,thereby permitting the seller to withdraw an amount of funds from abank; and transmitting the withdrawal permission certificate from theseller to the bank.
 3. An apparatus comprising: a processor; and acomputer readable medium in communication with the processor, thecomputer readable medium storing instructions configured to direct theprocessor to perform the method of: transmitting a verificationauthority permission certificate from a trusted agent to a verificationauthority; signing the transmitted verification authority permissioncertificate; transmitting the signed verification authority permissioncertificate from the verification authority to the trusted agent toverify that a seller has performed conditions of a contract;transmitting a withdrawal permission certificate from the trusted agentto the seller in response to receipt of the signed verificationauthority permission certificates, thereby permitting the seller towithdraw an amount of funds from a bank; and transmitting the withdrawalpermission certificate from the seller to the bank.
 4. A methodcomprising: transmitting a verification authority permission certificatefrom a trusted agent to a verification authority; receiving theverification authority permission certificate from the verificationauthority, in which the verification authority permission certificate issigned by the verification authority, and in which the received signedverification authority permission certificate verifies that a seller hasperformed conditions of a contract; and electronically transmitting awithdrawal permission certificate from the trusted agent to the sellerin response to receipt of the signed verification authority permissioncertificate, thereby permitting the seller to withdraw an amount offunds from a bank, in which the withdrawal permission certificate is fortransmitting from the seller to the bank.
 5. The method of claim 4, inwhich the bank is the trusted agent.
 6. The method of claim 4, furthercomprising: providing to the bank a contract that has been digitallysigned by the seller, a buyer and the trusted agent; and storing thetransmitted contract in a contract terms database at the bank.
 7. Themethod of claim 4, further comprising: establishing at the bank acryptographically-enabled account that corresponds to the storedcontract.
 8. The method of claim 7, further comprising: depositing fundsin the cryptographically-enabled account.
 9. The method of claim 8,further comprising: placing a cryptographic lock on thecryptographically-enable account.
 10. The method of claim 4, furthercomprising: using a permission certificate calculation program togenerate the verification authority permission certificate and thewithdrawal permission certificate.
 11. The method of claim 4, furthercomprising transmitting funds from the bank to the seller in response tothe bank receiving the withdrawal permission certificate.
 12. A computerreadable medium storing instructions configured to direct a processor toperform the method of claim
 4. 13. An apparatus comprising: a processor;and the computer readable medium of claim 12 in communication with theprocessor.